Retirement and Beyond

Canada has no inheritance tax and therefore there is less need to look at some of the trust instruments that are common in the US. But that doesn’t mean your responsibilities to manage your portfolio ends on retirement.

 

As described in the “Heading to Retirement” section, you should be continually managing your portfolio to ensure you have a collection of assets that reflect your age, your investment horizon, your risk tolerance and any upcoming large expenses (that dream cruise for the entire family).

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Upon retirement most Canadians will need to consider the disposition of their RRSP.  By law you have to convert your RRSP to a Registered Retirement Income Fund (RRIF) by the time you turn 71, or sooner if you need the income. Your investments transfer directly and there is no need to sell or liquidate any of your holdings.

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You must take withdrawals the year after you open your RRIF.  You can choose the amount you want to withdraw, as long as you meet the minimum annual withdrawal amount as set out by federal regulations. While the income earned in an RRIF is not taxed, any withdrawals from the RRIF are taxable in the year you withdraw them. Generally this a a good option for most people as they typically have little to no other income in retirement and their effective tax rate on the RRIF withdrawal is much lower than what it would have been in the year the original money was earned as put in the RRSP.​